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The Clean Power Plan and Electricity Demand: Considering Load Growth in a Carbon-Constrained Economy

Release of the Clean Power Plan (CPP) marks a significant moment in U.S. climate policy, but a host of economic, technological, and regulatory factors are also driving significant change in the electricity sector, complicating state regulatory decision making. Ensuring access to reliable and affordable electricity while protecting public health is a central goal of state regulation of electric utilities. Thus, expectations about the future of the electricity sector in general, and the future of electricity demand and emissions trajectories in particular, will likely play an important role in state CPP decisions. This policy brief discusses load growth—rising electricity demand—in the context of CPP design choices and demonstrates that it may occur under either a rate-based or mass-based approach. Following a brief overview of the Clean Power Plan and state choices, including rate-based and mass-based performance standards, it summarizes recent trends in load growth and carbon dioxide emissions in the U.S. electricity sector, showing how electricity demand growth in the United States has been low for more than a decade while the carbon intensity of electricity generation has declined. It then explores how both rate-based and mass-based plans can accommodate load growth and future emissions. Although no CPP approach limits electricity generation growth to meet new demand, rate-based approaches and mass-based approaches that cover only existing sources also allow emissions from new sources to increase. Mass-based plans that cover new sources would not limit electricity generation growth, but they would limit emissions from all covered sources.

Authors: Sarah Adair, Christina Reichert, Julie DeMeester, and David Hoppock
 

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Climate and Energy

Clean Air Act

Policy and Design

State Utility Regulation

Environmental Economics

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Policy Briefs

Incremental Climate Policy via the Clean Air Act

The Nicholas Institute for Environmental Policy Solutions' Jonas Monast and Christina Reichert write in the American Bar Association's publication Trends that tegulators implement climate policy based on the law Congress enacts, not the law they may wish Congress would enact. For the Obama Administration, that law is the existing Clean Air Act. More Clean Air Act-based climate policy is on its way. In October 2015, the White House announced forthcoming regulations limiting emissions of climate-forcing hydroflurocarbons, and the Clean Power Plan potentially sets the state for carbon dioxide limits for existing facilities and other sectors. Step-by-step, the U.S. Environmental Protection Agency is developing a broad strategy to reduce the nation's greenhouse gas emissions using existing statutory authority.

Authors: Jonas Monast and Christina Reichert

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Climate and Energy

Clean Air Act

Policy and Design

State Utility Regulation

Environmental Economics

State Policy

Journal Articles

Coastal “Blue” Carbon: A Revised Guide to Supporting Coastal Wetland Programs and Projects Using Climate Finance and Other Financial Mechanisms

Coastal wetlands conservation and restoration efforts aim to preserve biodiversity and generate benefits to local communities. A diverse portfolio of financing sources has been used for these efforts, including philanthropy, multi- and bilateral aid, in-country governmental funding, tourism-related and other usage fees, and fees and levies associated with wetlands-centric extractive industries. More recently, recognition of coastal wetlands as carbon sinks has opened the door for wetland managers to explore funding sources directed toward climate change mitigation. But finding appropriate funding sources to set up a coastal wetland carbon project or to develop a national carbon program (which includes or is solely focused on coastal wetlands) is often a challenge. Additionally, carbon finance alone often cannot support the necessary management activities. This report updates Keep It Fresh or Salty: An Introductory Guide to Financing Wetland Carbon Projects and Programs (2014). It uses revised guidance for program and project developers (governments, NGOs, local communities) and extends analysis to other finance avenues that can link and complement carbon activities with non-carbon-based financing sources such as debt-for-nature swaps. Rather than recommending one mechanism over any other, it encourages users to think holistically about the range of benefits provided by coastal wetlands conservation for climate mitigation and adaptation in order to optimize the full range of financial mechanisms.

Authors: D. Herr, T. Agardy, D. Benzaken, F. Hicks, J. Howard, E. Landis, A. Soles, and T. Vegh, with prior contributions from E. Pidgeon, M. Silvius, and E. Trines

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Oceans and Coasts

Marine Ecosystem Services

Law and Policy Mangement

Environmental Economics

Blue Carbon

Reports

Alternative Metrics for Comparing Domestic Climate Change Mitigation Efforts and the Emerging International Climate Policy Architecture

The availability of practical mechanisms for comparing domestic efforts aimed at mitigating global climate change is important for the stability, equity, and efficiency of international climate agreements. This article examines a variety of metrics that could be used to compare countries’ climate change mitigation efforts and to illustrate their potential application to large developed and developing countries. Because there is no single, comprehensive, measurable metric that could be applied to all countries, it suggests using a set of indicators to characterize and compare mitigation effort, akin to using a set of economic statistics to indicate the health of the macroeconomy. Given the iterative pledge-and-review approach that is emerging in current climate change negotiations, these statistics could enhance participation, commitment, and compliance if they can show that all parties are doing their “fair share,” both prospectively and retrospectively. The analysis highlights the need for a well-functioning policy surveillance regime.

Authors: Joseph E. Aldy and William A. Pizer

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Environmental Economics

Journal Articles

British Columbia’s Revenue-Neutral Carbon Tax: A Review of the Latest “Grand Experiment” in Environmental Policy

In 2008, British Columbia implemented the first comprehensive and substantial carbon tax in North America. By 2012, the tax had reached a level of C$30/t CO2, and it covered about three-quarters of all greenhouse gas emissions in the province. This article reviews existing evidence on the effect of the tax on greenhouse emissions, the economy, and the distribution of income, and it provides new evidence on public perceptions of the tax. Empirical and simulation models suggest that the tax has reduced emissions in the province by between 5 percent and 15 percent since being implemented. At the same time, models show that the tax has had negligible effects on the aggregate economy, despite some evidence that certain emissions-intensive sectors face challenges. Studies differ on the effects of the policy on the distribution of income; however, all studies agree that the effects are relatively small in this dimension. Finally, polling data show that the tax was initially opposed by the majority of the public but that three years post-implementation, the public generally supported the carbon tax.

Authors: Brian C. Murray and Nicholas Rivers

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Environmental Markets

Environmental Economics

Climate Change Policy

Energy Sector

Journal Articles

Biogas in the United States: Estimating Future Production and Learning from International Experiences

The substitution of biogas, an energy source derived from biological feedstock, for fossil natural gas (NG) can mitigate the build-up of greenhouse gases in the atmosphere, making it an attractive renewable energy source in a carbon-constrained future. Although upgraded, pipeline-quality biogas can augment the NG market supply in the United States, researchers and energy industry experts have little studied its long-term potential. This article estimates (1) levelized costs of energy for biogas production facilities operating with landfill waste, animal manure, wastewater sludge, and biomass residue feedstocks; (2) feedstock and technology pathway-specific biogas supply functions; and (3) the aggregate national biogas supply potential for the United States by 2040. Under a range of specified assumptions, generation of biogas could be expanded to approximately 3–5 percent of the total domestic NG market at projected prices of $5–6/MMBtu; the largest potential source comes from thermal gasification of agriculture and forest residues and biomass. As market signals have not spurred widespread adoption of biogas in the United States, policy incentives similar to those used in the European Union may be necessary to increase its production and use. Bioenergy policy in the European Union and the resulting market penetration achieved there provides important lessons for how biogas markets in the United States can overcome barriers to market expansion and, in doing so, provide substantial climate mitigation benefits.

Authors: Brian C. Murray, Christopher S. Galik, and Tibor Vegh

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Environmental Markets

Climate and Energy

Bioenergy

Regional Bioenergy

Environmental Economics

Energy Sector

Journal Articles

Do Protected Areas Reduce Blue Carbon Emissions? A Quasi-Experimental Evaluation of Mangroves in Indonesia

Mangroves provide multiple ecosystem services such as blue carbon sequestration, storm protection, and unique habitat for species. Despite these services, mangroves are being lost at rapid rates around the world. Using the best available biophysical and socio-economic data, the authors present the first rigorous large-scale evaluation of the effectiveness of protected areas at conserving mangroves and reducing blue carbon emissions in the journal Ecological Economics. The analysis examines the success of protected areas in Indonesia between 2000 and 2010, finding that their use has avoided the loss of 14,000 hectares of mangrove habitat and approximately 13 million metric tons (carbon dioxide equivelent) of blue carbon emissions. 

Authors: Daniela A. Miteva, Brian C. Murray, and Subhrendu K. Pattanayak

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Climate and Energy

Oceans and Coasts

Ecosystem Services

Environmental Economics

Blue Carbon

Journal Articles

The Competitiveness Impacts of Climate Change Mitigation Policies

The pollution haven hypothesis suggests that unilateral domestic climate change mitigation policy would impose significant economic costs on carbon-intensive industries, resulting in declining output and increasing net imports. To evaluate this hypothesis, we undertake a two-step empirical analysis. First, we estimate how production and net imports change in response to energy prices using a 35-year panel of approximately 450 U.S. manufacturing industries. Second, we use these estimated relationships to simulate the impacts of changes in energy prices resulting from a $15 per ton carbon price. We find that energy-intensive manufacturing industries are more likely to experience decreases in production and increases in net imports than less energy-intensive industries. Our best estimate is that competitiveness effects--measured by the increase in net imports--are as large as 0.8 percent for the most energy-intensive industries and represent no more than about one-sixth of the estimated decrease in production.

Authors: Joseph E. Aldy and William A. Pizer

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Environmental Economics

Journal Articles

Why Have Greenhouse Emissions in RGGI States Declined? An Econometric Attribution to Economic, Energy Market, and Policy Factors

The Regional Greenhouse Gas Initiative (RGGI) is a consortium of northeastern U.S. states that limit carbon dioxide emissions from electricity generation through a regional emissions trading program. Since RGGI started in 2009, regional emissions have sharply dropped. This analysis uses econometric models to quantify the emissions reductions due to RGGI and those due to other factors such as the recession, complementary environmental programs, and lowered natural gas prices. It shows that without RGGI, emissions would have been 24 percent higher. The program accounts for about half of the region’s post-2009 emissions reductions, which are far greater than those achieved in the rest of the United States.

Authors: Brian C. Murray and Peter T. Maniloff

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Climate and Energy

Environmental Economics

Climate Change Policy

Energy Sector

Modeling

States & Regions

State Policy

Journal Articles

Financing Land Use Mitigation: A Practical Guide for Decision-Makers

This report, produced as part of a U.S. Department of State-funded project by Winrock International, serves as a practical guide for those seeking finance to implement specific actions to reduce emissions from land use. It is intended to assist national policy makers and other decision makers in accessing and leveraging financial mechanisms to support activities that reduce forest greenhouse gas emissions and increase forest carbon stocks. It features an in-depth exploration of efforts to raise finance for low-emission, sustainable land use activities in Mexico and Ethiopia—two countries with ambitious REDD+ and LED goals but with widely differing natural environments, macroeconomic conditions, and institutional experience. These conditions allow Mexico and Ethiopia to offer important lessons to other countries seeking to develop low-emission and sustainable land use strategies.

Authors: Charlotte Streck, Brian Murray, André Aquino, Leslie Durschinger, Manuel Estrada, Charlie Parker, and Alemayehu Zeleke

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Adaptation

Land

Environmental Economics

Natural Resources

Sustainability

International

REDD

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